SAFE HARBOUR REGIMES FOR TRANSFER PRICING: ESSENCE AND CLASSIFICATION

Abstract

For the whole world, the methodology and peculiarities of the functioning of transfer pricing have become relevant since the emergence of multinationals, because all types of trade in the international community are deepened on the basis of application of transfer pricing; there is development in a use of new financial instruments; therefore, the movement of financial assets is simplified. At the same time, multinationals are searching for ways to optimize (and sometimes avoid) taxation. The purpose of the paper is to deepen the theoretical basis application of the safe harbour rule for transfer pricing. The main research method was the study of the theoretical and methodological possibilities of the safe harbour rule for the application of transfer pricing. It has been found that the practice of using safe harbours is an integral part of the economic life of multinationals, and their use has a double effect. First of all, science and practice highlight the negative side of this phenomenon: the outflow of a large amount of capital from one country to another, tax avoidance, which provokes economic instability. However, we should not ignore the fact that the activity of multinationals strengthens and develops the movement of financial resources in the international range, and the search for an optimal taxation system is economically justified. The author has considered classification features by which safe harbours are grouped for the purposes of transfer pricing. Therefore, the main features are classic and specialized; by the level of taxation, by the provision of reports and by the availability of contracts. The Top 10 relevant zones according to the Corporate Safe Harbours Index were determined in order to assess the potential safe harbours of multinationals. The paper outlines directions for further research on the issues related to the use of safe harbours by multinationals. The study shows that the aplication of the specified rule, despite some advantages for the payer, has significant disadvantages, like the threat of certain inconsistency with the arm‘s length principle or with the legislation of the country of the enterprise’s branch residence with which controlled transactions are carried out, so it complicates the regulation of the rules for the elimination of double taxation in such cases.